If you Google the definition of Asset, the definition from Wikipedia will be as follows,
“In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset).”
This is the so-called accounting definition of asset in which everyone that don’t know accounting will also know that anything with value that you own is your asset, such as your house, car, bed, television, teddy bear, and so on.
That however is the definition of asset in accounting terms, which does not fits the title of this article. The title of this article is, “Assets definition – for you & me”
Assets Definition – For You & Me
Why is it for you and me? The answer is because, both you and me is an individual and not a corporate, therefore, being human, we need a more humanly definition to asset instead of the one above, which is the definition of a non-human aka, a company.
In very simple terms, the definition of assets for you and me will be,
“Things that give you money.”
On the opposite side of things, the definition of liabilities for you and me will be,
“Things that take money from you.”
Preposterous!!! My Lecturer Didn’t Teach Me That!!! Who Said That?
I didn’t say that. Haha. It is time to arrow it away to someone else.
I learnt it from Robert Kiyosaki from his excellent book, Rich Dad Poor Dad. I highly encourage you to read it as it is a very simple to read book that will help you loads in your personal finances.
From his new definition, you will realised that some of the things that were traditionally your Assets are now your Liabilities. Essentially, Assets are income-producing whereas Liabilities are expense-producing.
This is basically all we need in our daily lives of you and me as in our lives, we need cashflow.
Ideally, we want a situation where we are in a situation where we have a net positive cashflow situation with all our expenses covered by our passive income instead of our active income. This implies that we have achieve financial freedom.
In our lives, we have many different incomes and expenses, which can disguise themselves as assets or liabilities, keep things simple.
As long as it gives you money, it is an asset. Anything that takes money away from you, it is a liability.
To help you ascertain your personal financial situation, click here to look at our Personal Finance Evaluator to get an idea of your financial situation. You can also click here to find out how long you need to achieve your Financial Freedom.
And of course, Passive Income generation is important, click on the image below to find out how you can safely generate Passive Income from the stock market, even if you have zero financial background.